Income tax revenue boost as exchequer deficit 'to be kept below €30bn'

The exchequer took in more than anticipated in income tax revenues in July, providing reassurance for Finance Minister Paschal Donohoe the Government's budget deficit will be kept below €30bn in 2020
Income tax revenue boost as exchequer deficit 'to be kept below €30bn'
Finance Minister, Paschal Donohoe. Picture: Sam Boal/Rollingnews.ie

The exchequer took in more than anticipated in income tax revenues in July as more parts of the economy opened up, providing reassurance for Finance Minister Paschal Donohoe the Government's budget deficit will be kept below €30bn in 2020 despite the severe Covid-19 economic shock.

The Department of Finance said the exchequer deficit had reached €7.4bn over the first seven months, reflecting the Government spending on pandemic and wage-support welfare programmes, and increased healthcare spending amid the crisis.    

Minister Donohoe said it was important to keep within deficit targets to ensure that the cost of borrowing remains low.        

At €4.3bn, overall tax revenues in the month were down 18.6% from July 2019 while, at €31.1bn for the first seven months, they were down only 2.5% from the same period in 2019.                            

The exchequer took in €1.59bn in income tax revenues in the month and €12.1bn over the first seven months. 

In a Vat payment month, the exchequer collected €1.6bn from the tax source in the month, down 30% from July 2019. 

Over the seven months, Vat revenues were running at €7.5bn, down 22.7% from 2019. 

The exchequer took in €165m in corporation tax revenues in July, which is not a major payment month for companies. For the seven months, corporation tax revenues were running at €6bn, up 31% from 2019.                 

"The income tax figures for July are positive," said Peter Vale at Grant Thornton.

"Although down 8% on the July 2019 equivalent, this compares with a 21% drop in June. 

With more people re-entering employment, the income tax figures are trending in the right direction and ahead of the department’s revised Covid-19 forecasts," he said. 

Mr Vale said that that the budget deficit will be lower than once feared "unless any further spikes in cases means a return to the more significant lockdown measures".

The CSO said that including people receiving the pandemic unemployment payment, that its adjusted unemployment measure was at 16.7% in July. 

"Analysing these figures by age, the unemployment rate is 41.2% for persons aged 15-24 years and 13.7% for persons aged 25 years and over," the CSO said. 

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